Wearables Market Cools Off During Final Months of 2016

Slumping smartwatch sales resulted in the slowest growth, year-over-year, for the wearables market

Basic wearables (fitness trackers), which account for around 85 percent of the total market, experienced double-digit growth nearly across the board

Downturn for the wearables market could be more than just a little blip on the radar

According to the latest data from market research firm IDC, the smartwatch market took a nosedive during the most recent quarter, which resulted in the smallest growth year-over-year to date for the wearables at just 3.1 percent. Wearables as a whole totaled 23 million shipments during the quarter, according to the International Data Corporation. And basic wearables (primarily comprised of fitness trackers), which account for around 85 percent of the total market, experienced double-digit growth nearly across the board.

But slumping smartwatch sales, which was compounded by the late launch of the Apple Watch Series 2, resulted in the weakest growth for the market since it emerged a little over a year ago. Apple’s year-over-year shipments were down 71 percent to 1.1 million units from 3.9 million in Q3 2015.

In its report, IDC credited the “continued growth” of the market to the launch of newer models, an expanding user base, and “an enticing summer season that allowed people to step out of their homes.”

The summary report does gloss over the fact that the growth year-over-year was the lowest it’s been, but IDC senior research analyst for the Mobile Device Trackers division Jitesh Ubrani noted that there have been significant changes in the marketplace.

"It's still early days, but we're already seeing a notable shift," he said. "Where smartwatches were once expected to take the lead, basic wearables now reign supreme. Simplicity is a driving factor and this is well reflected in the top vendor list as four out of five offer a simple, dedicated fitness device. Meanwhile, from a design perspective, many devices are focusing on fashion first while allowing the technology to blend in with the background."

What’s Up With Wearables?

This downturn for the wearables market could be more than just a little blip on the radar. As we’ve seen with companies like Fitbit, though there’s some growth still happening, it’s not happening at the pace that these companies and analysts were anticipating. And it’s cause for lots of concern.

But why?

The answer might be a simple one: Oversaturation of the marketplace. The wearables market is only getting bigger with more and more companies releasing newer, cheaper products. Consumers are gobbling those products up for now, but that’s not likely to last.

Wearables are not smartphones. There might be a situation where a consumer needs to replace a broken device, or they might decide to upgrade to the latest and greatest thing out there. But for the most part, once you purchase a fitness tracker, you’re going to use that fitness tracker until you run it into the ground. There are no two-year contracts, and the devices themselves aren’t being updated with must-have features. Nevermind the fact that once the user puts the device away, they rarely put it back on. According to a recent survey, about a third of wearables owners ditch their devices within six months of purchasing them.

To this point, wearables are more of a nice-to-have tech accessory.

CTA Remains Bullish on Fitness Tech

Despite the consumer sentiment that we’re hearing (and experiencing ourselves, in all honesty), the Consumer Technology Association is projecting strong growth for the wearables market. According to CTA Market Research, the wearables market consisted of roughly 4 percent of U.S. households in 2014. That number ballooned to 20 percent this year, and CTA projects “no end in site.”

“Wearable technology is no longer the domain of technophiles alone; it is now part of the larger consumer community,” CTA said in an email to Dealerscope. “What began as data collection for competitive athletes has now expanded into the worlds of fashion and health, and increasingly into ‘Internet of Things.’ Yet as wearable technology consistently breaks through new boundaries, it is in the realm of fitness and sports that it has joined the mainstream.”

Perhaps there’s a way forward for wearables in the form of strictly fitness-related tech. But it’s clear that, if the market wants to stop the slowdown, something needs to change in order to reinvigorate the consumer and reintroduce them to the concept of strapping a piece of tech onto their person.